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UK inflation: From too high, to too low?

Paul Dales, chief UK economist at Capital Economics, concurs: “Our view is that average earnings growth slips to around 2 per cent, but then ‘settles’ around 3.5 per cent. The latter is consistent with CPI services inflation falling back to levels consistent with the 2 per cent inflation target.” As a result, Dales thinks that core inflation could hover around 2 per cent over the coming year (with a dip below target next year). And after factoring in the price dynamics in goods, food, and energy, he thinks CPI inflation could fall below 1 per cent later this year.

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